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Amazon is considering using high capacity drones that would make its product deliveries more efficient. For this project, $155,000 would need to be spent right away to buy the required fleet of drones. The drones will be losing their economic value in equal amount each year, fully over their 5-year economic lives. Once the drones' economic life is over, they would all be sold for $11,300 selling price to a new owner, and Amazon would then immediately purchase the same but brand-new drones for the same price as what it paid for the initial fleet of drones. When those drones' life is over, they would again be sold and, again, brand-new ones would be purchased - all for the same prices as for the initial drones, and so on, over and over. Additional information: • Amazon expects $10,600 in annual operating costs. ● All future cash flows are year-end cash flows. ● Amazon pays 24 percent tax rate on all taxable income. Amazon requires an annual discount rate of 11 percent, and the rate is not expected to change in the future. ● The equivalent annual cost (EAC) of the drones equals (Since cost is a cash outflow, a negative dollar amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) EAC Amazon is considering using high capacity drones that would make its product deliveries more efficient. For this project, $155,000 would need to be spent right away to buy the required fleet of drones. The drones will be losing their economic value in equal amount each year, fully over their 5-year economic lives. Once the drones' economic life is over, they would all be sold for $11,300 selling price to a new owner, and Amazon would then immediately purchase the same but brand-new drones for the same price as what it paid for the initial fleet of drones. When those drones' life is over, they would again be sold and, again, brand-new ones would be purchased - all for the same prices as for the initial drones, and so on, over and over. Additional information: • Amazon expects $10,600 in annual operating costs. ● All future cash flows are year-end cash flows. ● Amazon pays 24 percent tax rate on all taxable income. Amazon requires an annual discount rate of 11 percent, and the rate is not expected to change in the future. ● The equivalent annual cost (EAC) of the drones equals (Since cost is a cash outflow, a negative dollar amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) EAC
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To calculate the equivalent annual cost EAC of the drones we need to consider the initial cost annua... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
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